Employment relationships in the United Arab Emirates are governed by clear legal frameworks that specify how and when employment contracts may be terminated. Understanding these provisions is essential for both employers and employees operating in the UAE market. This guide provides a detailed examination of the various circumstances under which an employment contract may come to an end under UAE labor law.
Table of Contents
Understanding Employment Contract Termination in the UAE
The UAE Federal Decree-Law No. 33 of 2021 on the Regulation of Employment Relations (the “UAE Labor Law”) and its subsequent amendments provide the legal foundation for all employment relationships in the UAE. This legislation outlines specific cases where employment contracts can legally end, protecting the rights of both parties involved.
WhatsApp
Facebook
LinkedIn
Limited vs. Unlimited Contract Types
Before diving into termination cases, it’s important to note that under the current UAE Labor Law, all employment contracts are considered limited-term contracts. The previous concept of “unlimited contracts” was eliminated when the new labor law came into effect on February 2, 2022.
- Limited Contract: Specifies a predetermined duration, not exceeding three years, and may be renewed for similar or shorter periods with the agreement of both parties.
Legal Grounds for Employment Contract Termination
1. Mutual Agreement
An employment contract may end through mutual consent between the employer and employee. This agreement should be documented in writing, specifying the terms of separation including notice period (if applicable) and final settlement details.
2. Contract Expiration
When a limited-term contract reaches its specified end date and is not renewed by either party, the employment relationship naturally terminates. Under the current law, employers must notify employees of their intention not to renew at least 14 days before the contract expiry date.
3. Unilateral Termination with Notice
Either party may terminate the employment contract for any legitimate reason by providing written notice to the other party. The notice period cannot be less than 30 days and not more than 90 days, as specified in the employment contract.
Key considerations for notice period terminations:
- The notice period must be served in full unless both parties agree otherwise
- The employment contract remains valid during the notice period
- The employee is entitled to full pay during this period
- Employees are entitled to reasonable time off to seek new employment during the notice period
4. Termination for Cause (Without Notice)
An employer may terminate an employment contract without notice if the employee commits any of the following violations as specified in Article 44 of the UAE Labor Law:
- Assuming a false identity or nationality, or submitting forged certificates or documents
- Committing an error causing substantial material loss to the employer
- Violating documented workplace safety instructions despite written warnings
- Failing to perform basic job duties despite two written warnings
- Divulging company secrets
- Being convicted of a crime involving honor, honesty, or public morals
- Being found under the influence of alcohol or drugs during working hours
- Physically assaulting the employer, manager, or colleagues
- Abandoning work without legitimate reason for more than 20 non-consecutive days or more than 7 consecutive days in a year
- Illegally exploiting their position for personal gain
- Joining another establishment without following applicable rules and procedures
Similarly, an employee may terminate the contract without notice if the employer:
- Fails to fulfill contractual or legal obligations toward the employee
- Assaults the employee
- Assigns the employee duties substantially different from those agreed upon without consent
5. Contract Termination During Probation Period
During the probation period (which cannot exceed six months), an employer may terminate the employment contract with a 14-day written notice. If an employee wishes to change employers during the probation period, they must:
- Provide one month’s notice if leaving to work for another UAE employer
- Adhere to other conditions set by the Ministry of Human Resources and Emiratisation (MOHRE)
6. Employee Resignation
An employee may resign by submitting a written resignation letter and serving the notice period specified in their contract. The resignation becomes effective once the notice period is completed.
7. Death or Permanent Disability
An employment contract automatically terminates upon the death of the employee. It may also end if the employee develops a permanent disability that prevents them from performing their job duties, supported by a medical certificate from an authorized medical committee.
8. Business Closure or Bankruptcy
If the employer’s business permanently closes or declares bankruptcy, employment contracts may be terminated following proper legal procedures.
9. Cancellation of Work Permit or Residency Visa
An employment contract ends if the employee’s work permit is canceled or not renewed by the authorities, or if the employee’s residency visa expires without renewal.
10. Retirement
When an employee reaches the statutory retirement age (60 years, with possible extensions), the employment contract may be terminated unless both parties agree to an extension.
Read more : UAE Employers Must Provide 12-Hour Daily Rest for Domestic Workers: MoHRE Guidelines
End-of-Service Procedures and Entitlements
When an employment contract ends, several procedures must be followed:
End-of-Service Benefits (Gratuity)
Employees who complete at least one year of continuous service are entitled to an end-of-service gratuity calculated as follows:
- 21 days’ basic salary for each of the first five years of service
- 30 days’ basic salary for each additional year
- Total gratuity should not exceed two years’ wages
The gratuity is calculated based on the last basic salary before termination. Certain deductions may apply depending on the reason for contract termination.
Calculate your Gratuity: Gratuity Calculator
Final Settlement
Upon contract termination, the employer must:
- Pay all outstanding salaries and benefits
- Settle the end-of-service gratuity (if applicable)
- Compensate for unused annual leave
- Provide air tickets to the employee’s home country (if specified in the contract)
- Issue an experience certificate
Non-Compete Clauses
Non-compete clauses in employment contracts remain enforceable after termination if they:
- Are necessary to protect legitimate business interests
- Are limited in time (maximum two years)
- Are specific in geographical scope
- Are specific regarding the nature of restricted work
Recent Changes to UAE Labor Law
The Ministry of Human Resources and Emiratisation regularly updates employment regulations. Notable recent changes include:
- Introduction of more flexible work models (remote work, shared jobs, etc.)
- Enhanced protection against discrimination and harassment
- Expanded maternity and paternity leave provisions
- Prohibition of forced labor and child labor
Legal Recourse for Wrongful Termination
If either party believes the employment contract was terminated unlawfully, they may file a complaint with the MOHRE. If unresolved, the case may proceed to the UAE courts.
Potential remedies for wrongful termination include:
- Compensation for arbitrary dismissal (up to three months’ salary)
- Reinstatement (in certain cases)
- Payment of outstanding entitlements
Read more: UAE Labour Department Contact Numbers & Labour Dispute Resolution
FAQs About Employment Contract Termination in the UAE
Can an employee terminate their contract during probation?
Yes, employees can terminate during probation but must provide 14 days’ notice. If leaving to join another UAE employer, one month’s notice is required and other MOHRE conditions may apply.
Is an employer required to provide a reason when terminating an employment contract?
For standard terminations with notice, the employer does not need to provide a specific reason as long as the termination is not discriminatory or retaliatory. For terminations without notice, the reason must fall within those specified in Article 44 of the UAE Labor Law.
How is gratuity calculated if the employee resigns?
If an employee resigns with less than five years of service, gratuity may be reduced. For contracts with durations of 1-3 years, gratuity is reduced to 1/3. For 3-5 years of service, it’s reduced to 2/3. After five years, employees receive full gratuity even upon resignation.
Can an employer force an employee to take garden leave during the notice period?
Yes, an employer can place an employee on garden leave (asking them not to attend work while remaining employed) during the notice period, provided the employee continues to receive full pay and benefits.
What happens if either party fails to give proper notice?
The party failing to provide the required notice must pay compensation equal to the salary for the notice period or the remaining part thereof.
Are there special termination provisions for UAE nationals?
Yes, terminating UAE nationals requires following additional procedures, including notifying MOHRE at least 30 days before the intended termination date.
Can an employer terminate a pregnant employee?
No, it is prohibited to terminate an employee due to pregnancy or maternity leave. Such termination would be considered discriminatory and illegal.
Conclusion
Understanding the legal framework surrounding employment contract termination in the UAE is crucial for maintaining compliance and protecting your rights, whether you’re an employer or employee. As labor laws continue to evolve, staying informed about these changes ensures you can navigate employment relationships effectively.
For specific cases and personalized advice, consult with a legal professional specializing in UAE labor law or contact the Ministry of Human Resources and Emiratisation directly.
Disclaimer: This article provides general information and should not be construed as legal advice. For specific situations, please consult with a qualified legal professional specializing in UAE labor law.
Pingback: UAE Banks To Raise Minimum Balance Requirements From June 2025: What Expatriates And Residents Need To Know - UAE Labour News